Comerica Economic Weekly

It was a light week for data. The main additions were new and existing home sales for January. Residential real estate markets tightened up in January, very good news, as both new and existing home sales showed improvement. Existing home sales increased by 4.3 percent in January, to a 4.57 million unit sales rate; the fastest sales rate since May 2010. New home sales actually decreased by 0.9 percent in January, but the level for December was revised up, so new home sales hit a stronger-than-expected annual rate of 321,000 units in January. Also, even with the dip in new home sales for January, the trend since mid-year 2011 is going in the right direction. The budding strength in home sales is consistent with the stronger job creation that began in late 2011 and looks like it is carrying over into early 2012. Given the current very high affordability of houses, job creation is the catalyst that can start a reaction in housing markets. Initial claims for unemployment insurance maintained recent gains, holding at 351,000 for the week ending February 18. With UI claims comfortably below 400,000 we can start to expect a little more out of the monthly payroll employment numbers. February could easily show another 2 handle on jobs, with a payroll print of about 200,000. Given the surge in the household employment survey in January we might not see improvement in the unemployment rate in February, but the unemployment rate really doesn’t matter to housing markets—it’s all about job creation. Jobs generate income, provide confidence, and require relocations. Despite nascent improvement in home sales, prices remain soft. The median price of an existing home sold in January was 2.0 percent below the previous January. But there is good news, too, and that is that the rate of house price declines has eased significantly.

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